-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RMqjeHWyxDHpDs575ocoGWv4+09LSEef9wvmUzBMuPoUgOyjik5bjAhZ0DmdA0c/ blcgdhc01SMKfRnTAMJNBQ== 0000950152-00-003899.txt : 20000512 0000950152-00-003899.hdr.sgml : 20000512 ACCESSION NUMBER: 0000950152-00-003899 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LUBRIZOL CORP CENTRAL INDEX KEY: 0000060751 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL ORGANIC CHEMICALS [2860] IRS NUMBER: 340367600 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05263 FILM NUMBER: 626427 BUSINESS ADDRESS: STREET 1: 29400 LAKELAND BLVD CITY: WICKLIFFE STATE: OH ZIP: 44092 BUSINESS PHONE: 2169434200 MAIL ADDRESS: STREET 1: 29400 LAKELAND BLVD CITY: WICKLIFFE STATE: OH ZIP: 44092 10-Q 1 THE LUBRIZOL CORPORATION 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ..... to ..... Commission File Number 1-5263 THE LUBRIZOL CORPORATION (Exact name of registrant as specified in its charter) Ohio 34-0367600 (State or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification No.) 29400 Lakeland Boulevard Wickliffe, Ohio 44092-2298 (Address of principal executive offices) (Zip Code) (440) 943-4200 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Number of the registrant's common shares, without par value, outstanding, as of April 30, 2000: 53,680,643. 2 PART I. FINANCIAL INFORMATION ----------------------------- Item 1 Financial Statements --------------------------- THE LUBRIZOL CORPORATION ========================
CONSOLIDATED BALANCE SHEETS - --------------------------------------------------------------------------------------------------------- March 31 December 31 (In Thousands of Dollars) 2000 1999 - --------------------------------------------------------------------------------------------------------- ASSETS - ------ Cash and short-term investments ........................................ $ 126,571 $ 185,465 Receivables ............................................................ 322,100 301,256 Inventories: Finished products .................................................... 126,889 118,135 Products in process .................................................. 51,632 56,855 Raw materials ........................................................ 74,458 66,102 Supplies and engine test parts ....................................... 17,344 17,057 ----------- ----------- 270,323 258,149 ----------- ----------- Other current assets ................................................... 31,334 35,572 ----------- ----------- Total current assets ............................... 750,328 780,442 Property and equipment - net ........................................... 660,078 670,512 Goodwill and intangible assets - net ................................... 172,257 149,779 Investments in nonconsolidated companies ............................... 36,673 30,441 Other assets ........................................................... 53,444 51,180 ----------- ----------- TOTAL ......................................... $ 1,672,780 $ 1,682,354 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Short-term debt and current portion of long-term debt .................. $ 37,151 $ 37,584 Accounts payable ....................................................... 137,701 138,841 Accrued expenses and other current liabilities ......................... 126,117 134,875 ----------- ----------- Total current liabilities .......................... 300,969 311,300 ----------- ----------- Long-term debt ......................................................... 364,772 365,372 Postretirement health care obligation .................................. 101,755 108,717 Noncurrent liabilities ................................................. 49,803 45,054 Deferred income taxes .................................................. 61,053 61,787 ----------- ----------- Total liabilities .................................. 878,352 892,230 ----------- ----------- Contingencies and commitments Shareholders' equity: Preferred stock without par value - authorized and unissued: Serial Preferred Stock - 2,000,000 shares Serial Preferred Shares - 25,000,000 shares Common Shares without par value: Authorized 120,000,000 shares Outstanding - 53,957,534 shares as of March 31, 2000 after deducting 32,238,360 treasury shares, 54,477,292 shares as of December 31, 1999 after deducting 31,718,602 treasury shares .................. 79,221 85,984 Retained earnings .................................................... 780,338 758,090 Accumulated other comprehensive income (loss) ........................ (65,131) (53,950) ----------- ----------- Total shareholders' equity ......................... 794,428 790,124 ----------- ----------- TOTAL ......................................... $ 1,672,780 $ 1,682,354 =========== =========== Amounts shown are unaudited
-2- 3 THE LUBRIZOL CORPORATION ========================
CONSOLIDATED STATEMENTS OF INCOME - ------------------------------------------------------------------------------- Three Months Ended March 31 ------------------------------ (In Thousands Except Per Share Data) 2000 1999 - ------------------------------------------------------------------------------- Net sales ...................................... $ 435,034 $ 446,627 Royalties and other revenues ................... 1,127 918 --------- --------- Total revenues ....................... 436,161 447,545 Cost of sales .................................. 307,708 303,174 Selling and administrative expenses ............ 43,499 45,003 Research, testing and development expenses ..... 34,649 36,898 --------- --------- Total cost and expenses .............. 385,856 385,075 Gain from litigation settlement ................ - 14,476 Special charge ................................. - (3,136) Other income (expense) - net ................... (1,741) (3,108) Interest income ................................ 2,550 1,007 Interest expense ............................... (7,229) (7,140) --------- --------- Income before income taxes ..................... 43,885 64,569 Provision for income taxes ..................... 13,780 25,475 --------- --------- Net income ..................................... $ 30,105 $ 39,094 ========= ========= Net income per share ........................... $ 0.55 $ 0.72 ========= ========= Net income per share, diluted .................. $ 0.55 $ 0.72 ========= ========= Dividends per share ............................ $ 0.26 $ 0.26 ========= ========= Average common shares outstanding .............. 54,300 54,549
Amounts shown are unaudited. -3- 4 THE LUBRIZOL CORPORATION ======================== CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------------- Three Months Ended March 31 --------------------------- (In Thousands of Dollars) 2000 1999 - --------------------------------------------------------------------------------------- Cash provided from (used for): Operating activities: Net income ............................................... $ 30,105 $ 39,094 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization ........................ 24,099 24,253 Deferred income taxes ................................ 1,805 4,106 Special charge ....................................... 3,136 Change in current assets and liabilities: Receivables ........................................ (23,621) (28,749) Receivable from litigation settlement .............. (16,800) Inventories ........................................ (13,839) 7,668 Accounts payable and accrued expenses .............. 6,987 31,785 Other current assets ............................... 3,272 15,333 Other items - net .................................... (4,775) 2,775 --------- --------- Total operating activities ..................... 24,033 82,601 Investing activities: Capital expenditures ................................... (17,774) (18,327) Acquisitions and investments in nonconsolidated companies ............................................ (35,741) Other - net ............................................ 183 547 --------- --------- Total investing activities ..................... (53,332) (17,780) Financing activities: Short-term borrowings (repayment) ...................... 19 (8,122) Long-term repayments ................................... (14) (422) Dividends paid ......................................... (14,152) (14,183) Common shares purchased ................................ (15,850) Stock options exercised ................................ 1,201 23 --------- --------- Total financing activities ..................... (28,796) (22,704) Effect of exchange rate changes on cash .................. (799) (3,495) --------- --------- Net increase (decrease) in cash and short term investments (58,894) 38,622 Cash and short-term investments at the beginning of period .............................................. 185,465 53,639 --------- --------- Cash and short-term investments at end of period ......... $ 126,571 $ 92,261 ========= =========
Amounts shown are unaudited. -4- 5 THE LUBRIZOL CORPORATION ------------------------ Notes to Consolidated Financial Statements March 31, 2000 1. The accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position as of March 31, 2000 and December 31, 1999, and the results of operations and cash flows for the applicable periods ended March 31, 2000 and 1999. 2. Net income per share is computed by dividing net income by average common shares outstanding during the period. Net income per diluted share includes the dilutive effect resulting from outstanding stock options and stock awards. Per share amounts are computed as follows: Three Months Ended March 31 --------------------- 2000 1999 ------- ------- Numerator: Net income available to common shareholders $30,105 $39,094 ======= ======= Denominator: Weighted average common shares outstanding 54,300 54,549 Dilutive effect of stock options and awards 178 59 ------- ------- Denominator for net income per share, diluted 54,478 54,608 ======= ======= Net income per share $ .55 $ .72 ======= ======= Net income per share, diluted $ .55 $ .72 ======= ======= 3. Total comprehensive income for the three-month periods ended March 31, 2000 and 1999 is comprised as follows: Three Months Ended March 31 --------------------- 2000 1999 ------- ------- Net income $30,105 $39,094 Other comprehensive income(loss) (11,181) (20,167) ------- ------- Total comprehensive income $18,924 $18,927 ======= ======= Other comprehensive income (loss) in each of the periods above is comprised solely of foreign currency translation adjustments, net of related tax effects. 5 6 THE LUBRIZOL CORPORATION ------------------------ Notes to Consolidated Financial Statements ------------------------------------------ March 31, 2000 4. In March 2000, the company purchased certain assets of Alox Corporation (Alox) from RPM, Inc. Alox is a leading supplier of additives for corrosion prevention in metalworking products, with 1999 revenues of approximately $20 million. In March 2000, the company also acquired an additional 10% interest in its India joint venture, bringing the company's ownership interest up to 50%. The aggregate purchase price of both acquisitions was approximately $36 million of which $26 million was assigned to goodwill and intangible assets. The Alox purchase price is subject to working capital adjustments, which are not expected to be significant. Amortization of goodwill is on a straight-line basis over 15 years. 5. The second phase of the company's cost reduction program began in the third quarter of 1999 and involves primarily the downsizing of the company's Painesville, Ohio, manufacturing plant. This will result in the reduction of approximately 5% of the company's workforce, or 200 positions, and the shutdown of 23 of Painesville's 36 production systems. Through March 31, 2000, the company has shut down 12 of the 23 targeted systems and completed approximately 47% of the workforce reduction. Cash expenditures of approximately $.2 million were made in 2000 related to the cost reduction program. Approximately $10.4 million remains as an accrued liability at March 31, 2000. 6. The company aggregates its product lines into two principal operating segments: chemicals for transportation and chemicals for industry. The company evaluates performance and allocates resources based on segment contribution income, defined as revenues less expenses directly identifiable to the product lines aggregated within each segment. In addition, the company allocates corporate research, testing, selling and administrative expenses, and excess production capacity costs, in arriving at segment operating profit before tax. The following table presents a summary of the company's reportable segments for the three months ended March 31, 2000 and 1999 on a basis of segmentation consistent with the previous year end:
Three Months Ended March 31 2000 1999 ------- ------- Revenue from external customers: Chemicals for transportation $360,051 $374,172 Chemicals for industry 76,110 73,373 -------- -------- Total revenues $436,161 $447,545 ======= ======== Segment contribution income: Chemicals for transportation $75,554 $ 88,559 Chemicals for industry 12,118 12,797 ------- -------- Total segment contribution income $87,672 $101,356 ======= ======== Segment operating profit before tax: Chemicals for transportation $40,974 $ 51,701 Chemicals for industry 7,590 7,661 ------- -------- Total segment operating profit before tax 48,564 59,362 Gain from litigation settlement - 14,476 Special charge - (3,136) Interest expense - net (4,679) (6,133) ------- -------- Consolidated income before tax $43,885 $ 64,569 ======= ========
6 7 Prior-year segment contribution income has been restated to reflect the exclusion, for internal management reporting purposes, effective January 1, 2000, of excess production capacity from product costs. The change had no effect on segment operating profit before tax. 7. On March 28, 2000, the company entered into an interest rate swap agreement that effectively converts the interest on $25 million of 5.875% notes due 2008 to a variable rate of three-month LIBOR less 143 basis points. On April 5, 2000, the company entered into a similar agreement, for another $25 million, at a rate of three-month LIBOR less 118 basis points. 8. The company had an effective tax rate of 31.4% for the three months ended March 31, 2000 compared to 39.5% for the three months ended March 31, 1999. The decrease in the effective tax rate is due in part to the U.S. tax benefit from charitable contributions of technology to an educational institution, and also to the favorable impact of statutory tax rate changes for certain foreign subsidiaries. 7 8 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations --------------------------------------------- RESULTS OF OPERATIONS - --------------------- Our revenues declined slightly in the first quarter of 2000 as compared to the first quarter of 1999, due to a drop in volume and a lower average selling price. A significant increase in raw material costs resulted in lower profit margins for first quarter of 2000. Although we benefited from lower operating expenses and a lower effective tax rate, partially offset by unfavorable currency effects, the lower gross profit resulted in reduced net income in the first quarter of 2000 as compared to the first quarter of 1999. We group our product lines into two operating segments: chemicals for transportation and chemicals for industry. Chemicals for transportation comprised approximately 83% of our consolidated revenues and 87% of our segment pretax operating profits for the full year 1999 (83% of revenues and 84% of operating profits for the three months ended March 31, 2000). This discussion and analysis of our financial condition and results of operations is primarily focused upon the company as a whole, since we believe this provides the most appropriate understanding of our business. See Note 6 to the financial statements for further financial disclosures by operating segment. Our consolidated revenues decreased $11.4 million or 2.5% for the first quarter of 2000 compared with the same period in 1999. Chemicals for transportation revenues decreased $14.1 million, or 4%, and chemicals for industry revenues increased $2.7 million, or 4%, in the first quarter of 2000 compared to 1999. Our average unit selling price in the first quarter of 2000 declined by 1% compared with the first quarter of 1999, due to a 2% negative currency effect (principally from the weaker Euro), offset by slightly favorable product mix. Sequentially, first quarter 2000 average selling price was flat with the fourth quarter of 1999. This was the result of a 2% contribution from the phasing in of our December 1999 price increase, offset by negative mix and currency effects. Our shipment volume declined 2% in the first quarter of 2000 compared with the very strong first quarter of 1999, with lubricant additive shipments to North American customers decreasing 5% and international shipment volume flat with 1999. Asia Pacific's volume declined 10% compared to an unusually strong first quarter of 1999 and Europe and Latin America volume increased 6% and 1%, respectively. We believe our first quarter 2000 volume was negatively impacted by some advance buying by customers in late 1999 related to Year 2000 concerns and also to purchases in advance of our announced December price increase. 8 9 THE LUBRIZOL CORPORATION ------------------------ Management's Discussion and Analysis of Financial Condition and Results of Operations --------------------------------------------- Our cost of sales for the three months ended March 31, 2000 increased $4.5 million over the first quarter of 1999 because of 6% higher average raw material costs due to the impact of higher crude oil costs on petrochemical prices, partially offset by 5% lower manufacturing expenses and the impact of lower volume. Our manufacturing cost per metric ton sold in the first quarter of 2000 was 3% lower than the same period of 1999 due to savings resulting from the integration of the Adibis business and favorable currency effects. We expect our raw material costs to continue to increase into the third quarter of 2000 because of price increases from suppliers and the delayed effect of supplier increases on cost of sales at our international subsidiaries, which are on first-in, first-out and weighted average costing methods. Our U.S. purchasing index of top raw materials increased 10% from December 1999 to March 2000. In response to higher raw material costs, we announced a second price increase which is currently being phased in. Gross profit (net sales less cost of sales) for the three months ended March 31, 2000 decreased $16.1 million, or 11%, compared with the same 1999 period because of higher raw material costs and lower volume, partially offset by lower manufacturing expenses. All of the decrease was attributable to the chemicals for transportation operating segment. Our gross profit percentage (gross profit divided by net sales) decreased to 29.3% in the first quarter of 2000 compared to 32.1% in the first quarter of 1999 for the same reasons. Sequentially, the percentage declined from 30.7% in the fourth quarter of 1999. We expect rising raw material costs to continue to put pressure on margins in the near term, until these costs stabilize and our price increases become fully effective. Selling and administrative expenses decreased by $1.5 million, or 3%, for the three months ended March 31, 2000 compared with the same period of 1999 due to lower legal expenses and lower implementation costs for our enterprise-wide, management information system. Our research, testing and development expenses (technology expenses) decreased $2.2 million, or 6%, for the first quarter of 2000 compared with 1999 because of lower activity at third-party testing facilities resulting, in part, from an industry delay in the effective date of the proposed new U.S. passenger car motor oil technical standard, GF-3. We expect the delay will defer the commencement of this testing until the fourth quarter of 2000, and expect full year technology expense will be approximately at last year's level. The change in other income (expense) favorably affected pre-tax income by $1.4 million for the three months ended March 31, 2000 compared to 1999 principally due to a reduction in currency translation and transaction losses that had occurred in the prior year. Interest income increased $1.5 million for the three months ended March 31, 2000 compared to 1999 because of a higher level of cash investments resulting from our strong operating cash flow in 1999. 9 10 THE LUBRIZOL CORPORATION Management's Discussion and Analysis of Financial Condition and Results of Operations --------------------------------------------- On March 31, 1999, Lubrizol and Exxon Corporation reached a settlement of all pending intellectual property litigation between the two companies and their affiliates, except for litigation pending in Canada. Under the settlement agreement, Exxon paid us cash of $16.8 million in April 1999. After deducting related expenses, this settlement increased pre-tax income by $14.5 million ($9.0 million after-tax or $.16 per share) for the three months ended March 31,1999. In the first quarter of 1999, we recognized additional expense of $3.1 million ($2.9 million after-tax or $.05 per share), to reflect an additional amount for separation benefits, principally in Japan, under our cost reduction program originally announced and recognized in the fourth quarter of 1998. As a result of the above factors, our net income before tax for the first quarter of 2000 decreased 32% to $43.9 million, as compared to $64.6 million for the first quarter of 1999. After excluding from the first quarter of 1999 the gain from the Exxon litigation settlement and the special charge expense, our net income before tax decreased $9.3 million, or 18%. Segment operating profit before tax, which excludes interest expense, decreased $10.7 million, or 21%, for chemicals for transportation and decreased $.1 million, or 1%, for chemicals for industry. We had an effective tax rate of 31.4% for the three months ended March 31, 2000 compared to 39.5% for the three months ended March 31, 1999 (38.0% before the litigation settlement and the special charge). We also anticipate an effective tax rate of 31.4% for the full year 2000, as compared with 36.5% for the full year 1999, prior to the litigation settlement and special charge. This anticipated decrease in the annual effective tax rate is due in part to the U.S. tax benefit from charitable contributions of technology to an educational institution, and also to the favorable impact of statutory tax rate changes for certain of our foreign subsidiaries. The lower tax rate used for the first quarter of 2000 had a favorable effect of $.05 per share compared to the rate of 38.0%, prior to litigation settlement and special charge, used for the first quarter of 1999. Changes in currency exchange rates during the first quarter of 2000 had an unfavorable effect on net income per share of $.05 as compared to exchange rates in effect during the first quarter of 1999. This was primarily the result of the strengthening of the U.S. dollar against the Euro. Primarily as a result of the above factors, our net income for the first quarter of 2000 decreased 23% to $30.1 million ($.55 per share) as compared to $39.1 million ($.72 per share) for the first quarter of 1999. After excluding from the first quarter of 1999 the gain from the Exxon litigation settlement and the special charge expense, our net income for the first quarter of 2000 decreased 9% from the $33.0 million ($.61 per share) earned in the first quarter of 1999. WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES - ------------------------------------------------ Cash provided from operating activities was $24.0 million for the first three months of 2000 as compared with $82.6 million for the first three months of 1999. The decrease was caused principally by a working capital buildup of $27.2 million in 2000 compared to reduction of $9.2 million in 1999, and a $9.0 million decrease in net income compared to last year's level. The working capital change resulted from increased inventories in advance of planned maintenance at some of our facilities; a lower net 10 11 THE LUBRIZOL CORPORATION ------------------------ Management's Discussion and Analysis of Financial Condition and Results of Operations --------------------------------------------- addition to current liabilities because we made variable compensation payments, based on 1999 results, during the first quarter of 2000 with no comparable payments last year; and the collection of a $16.1 million income tax refund in the first quarter of 1999, with no comparable collection this year. Our capital expenditures in the first three months of 2000 were $17.8 million as compared with $18.3 million for same period in 1999. We estimate capital spending for the full year 2000 will be $75 million to $80 million as compared with $64.9 million in 1999. During the first quarter of 2000, we spent approximately $36 million on two acquisitions. We acquired certain production assets and working capital of Alox Corporation (Alox), a leading supplier of additives for corrosion prevention in metalworking products, with annual revenues of approximately $20 million. We will integrate the Alox operation into our existing infrastructure and, after a transition period, relocate the manufacturing activity to our Painesville, Ohio plant. We also acquired an additional 10% interest in our India joint venture, bringing our ownership interest up to 50%. We maintained an active share repurchase program for a number of years, but suspended repurchases at the end of 1998 because net debt as a percent of capitalization had reached our target level of 35% and we wanted to preserve cash and borrowing capacity to fund potential acquisitions. Because of our strong cash flow in 1999 and the completion of only one small acquisition during that year, our net debt to capitalization decreased to 25% at year-end. As a result, we resumed share repurchases with approximately 140,000 shares repurchased for $4.2 million in late 1999, and approximately 578,000 shares repurchased for $15.8 million in the first quarter of 2000. We plan to spend approximately $20 million on share repurchases during the second quarter of 2000. Our net debt to capitalization ratio at March 31, 2000 is 28.4%. Net debt is the total of short- and long-term debt, reduced by cash and short-term investments in excess of an assumed operating cash level of $40 million. Capitalization is shareholders' equity plus net debt. Primarily as a result of these activities and the payment of dividends, our balance of cash and short-term investments decreased $58.9 million at March 31, 2000 compared with December 31, 1999. We currently have $18,375,000 of outstanding tax-exempt marine terminal refunding revenue bonds which mature on July 1, 2000. We are in the process of replacing this debt with $18,375,000 of new tax-exempt marine terminal refunding revenue bonds, which will enable us to maintain the lower relative funding costs associated with this type of financing. The issuance of the new debt and the retirement of the existing debt are expected to be completed during the second quarter. Our financial position remains strong with a ratio of current assets to current liabilities of 2.5 to 1 at March 31, 2000, the same as at December 31, 1999. We believe our existing credit facilities, internally generated funds and ability to obtain additional financing will be sufficient to meet our future capital needs. COST REDUCTION PROGRAM - ---------------------- We initiated a program in 1998 to reduce costs and improve our worldwide operating structure. The first phase of this program was substantially completed by the end of the third quarter of 1999. The second phase, which began in the third quarter of 1999 and involves primarily the 11 12 THE LUBRIZOL CORPORATION ------------------------ Management's Discussion and Analysis of Financial Condition and Results of Operations --------------------------------------------- downsizing of our Painesville, Ohio manufacturing facility, will result in the workforce reduction of approximately 5% of our workforce, or 200 positions, and the shutdown of 23 of Painesville's 36 production systems. Through March 31, 2000, we have shut down 12 of the 23 targeted production systems and completed approximately 47% of the anticipated workforce reduction. We estimate annualized savings of $20 million by the latter part of 2000, of which approximately $1.5 million has been achieved through March 31, 2000. Cash expenditures related to the cost reduction program of approximately $.2 million were made in the first quarter of 2000. Approximately $10.4 million remains as an accrued liability at March 31, 2000, nearly all of which represents cash yet to be expended in 2000. Additionally, we will spend approximately $8 million of capital to transfer a portion of the capacity to our Deer Park, Texas plant, of which $1.9 million has been spent through March 31, 2000. CAUTIONARY STATEMENT FOR SAFE HARBOR PURPOSES - --------------------------------------------- This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of the federal securities laws. As a general matter, forward-looking statements are those focused upon future plans, objectives or performance as opposed to historical items and include statements of anticipated events or trends and expectations and beliefs relating to matters not historical in nature. Such forward-looking statements are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Such uncertainties and factors could cause our actual results to differ materially from those matters expressed in or implied by such forward-looking statements. We identified certain, but not necessarily all, of these uncertainties and factors in the Management's Discussion and Analysis contained on pages 22 and 23 of our 1999 Annual Report to our shareholders, and they are incorporated by reference herein. 12 13 THE LUBRIZOL CORPORATION ------------------------ Item 3. Quantitative and Qualitative Disclosures About Market Risk ---------------------------------------------------------- We operate manufacturing and blending facilities, laboratories and offices around the world and utilize fixed and variable rate debt to finance our global operations. As a result, we are subject to business risks inherent in non-U.S. activities, including political and economic uncertainty, import and export limitations, and market risk related to changes in interest rates and foreign currency exchange rates. We believe the political and economic risks related to our foreign operations are mitigated due to the stability of the countries in which our largest foreign operations are located. In the normal course of business, we use derivative financial instruments including interest rate swaps and foreign currency forward exchange contracts to manage our market risks. Our objective in managing our exposure to changes in interest rates is to limit the impact of such changes on earnings and cash flow and to lower our overall borrowing costs. Our objective in managing our exposure to changes in foreign currency exchange rates is to reduce the economic effect on earnings and cash flow associated with such changes. Our principal currency exposures are in the major European currencies, the Japanese yen and certain Latin American currencies. We do not hold derivatives for trading purposes. A quantitative and qualitative discussion about our market risk is contained on page 23 of our 1999 Annual Report to our shareholders. There have been no material changes in the market risks faced by us since December 31, 1999. 13 14 THE LUBRIZOL CORPORATION ------------------------ PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds ----------------------------------------- (c) On January 31, 2000, we issued 951 common shares in a private placement transaction exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) of that Act. We issued the shares to a former officer pursuant to a deferred compensation program for executive officers. On February 1, 2000, we issued 225 common shares in a private placement transaction exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) of that Act. We issued the shares to a former director pursuant to a deferred compensation plan for directors. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits (10)(b)* The Lubrizol Corporation Amended Deferred Compensation Plan for Directors. (10)(h)* The Lubrizol Corporation 1991 Stock Incentive Plan, as amended. (10)(i)* The Lubrizol Corporation Deferred Stock Compensation Plan for Outside Directors. (10)(k)* The Lubrizol Corporation Deferred Compensation Plan for Officers (Amended as of March 11, 2000). (10)(l)* The Lubrizol Corporation Executive Council Deferred Compensation Plan, as amended. * Indicates management contract or compensatory plan or arrangement. (27) Financial Data Schedule. (b) Reports on Form 8-K There were no reports on Form 8-K filed during the quarter ended March 31, 2000. Signatures ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE LUBRIZOL CORPORATION /s/John R. Ahern ------------------------------- John R. Ahern Chief Accounting Officer and Duly Authorized Signatory of The Lubrizol Corporation Date: May 11, 2000 14 EX-10.B 2 EXHIBIT 10(B) 1 Exhibit (10)(b) THE LUBRIZOL CORPORATION Amended Deferred Compensation Plan For Directors ------------------------------------------------ (Amended as of March 11, 2000) 1. PURPOSE. The purpose of this Amended Deferred Compensation Plan For Directors (the "Plan"), entered this 27th day of June, 1994, is to continue to permit any member of the Board of Directors (the "Participant") of The Lubrizol Corporation (the "Company"), to defer all or a portion of the compensation to be received as a director until after the Participant ceases to be a director, all as provided in the Plan. 2. ADMINISTRATION. The Plan shall be administered by the Organization and Compensation Committee of the Board of Directors of the Company (the "Committee"). The Committee's interpretation and construction of all provisions of this Plan shall be binding and conclusive. In the event that a Participant is a member of the Committee, such Participant shall not participate in any decision of the Committee relating to that Participant's participation in this Plan. 3. RIGHT TO DEFER COMPENSATION. (a) Any director of the Company may, at any time, elect to defer under this Plan all, or such portion as the director may designate, of (i) that director's annual retainer fee and/or (ii) the attendance fees for attending directors' meetings or committees thereof. The annual retainer fee, for this purpose, shall be deemed to be earned equally and ratably as of the last day of each calendar quarter during the calendar year. Attendance fees are deemed to be earned when the director attends the meeting for which the attendance fee is paid. (b) The election described in paragraph (a) shall be made by written notice delivered to the Vice President, Human Resources, of the Company specifying (i) the length of time, not less than one year, during which the election shall apply, (ii) the portion of the retainer fee and/or the attendance fee to be deferred for such year or years, (iii) time of distribution, and (iv) if applicable, the payment option as provided in Section 6 for distributions upon ceasing to be a director. (c) The election under this Section 3 shall take effect on the first day of the calendar quarter following the month in which the election is made. A director may designate that the election shall remain in effect until the director, on a prospective basis, withdraws the election or changes the amount to be deferred. 1 2 (d) Any notice of withdrawal of the deferral election or change in the amount to be deferred shall be effective on the first day of the calendar quarter following the month in which such notice is given to the Company's Vice President, Human Resources. 4. COMPENSATION DEFERRAL ACCOUNTS. (a) On the date the compensation deferred under this Plan would have become payable to the Participant in the absence of an election under this Plan to defer payment thereof, the amount of such deferred compensation shall be credited, pursuant to Participant's election, to a Stock Deferral Account and/or any of the Cash Deferral Account investment portfolios designated as available by the Committee from time to time. A Participant may transfer any portion or all of the balance in any Deferral Account among the Stock Deferral Account and the Cash Deferral Account investment portfolios as allowed under rules established by the Committee; provided, however that any deferrals made hereunder into a Stock Deferral Account prior to January 1, 2000, shall be governed by the provisions of the Plan in effect prior to January 1, 2000. All Deferral Accounts shall be established and maintained for each Participant in the Company's accounting books and records and the Company shall be under no obligation to purchase any investments designated by the Participant. (b) Participant's Cash Deferral Accounts shall be credited with any gains or losses equal to those generated as if the Participant's Cash Deferral Account balances had been invested in the applicable investment portfolio(s) selected by the Participant. (c) The amount of deferred compensation credited to a Participant's Stock Deferral Account pursuant to paragraph (a) shall be used to determined the number of full and fractional units ("Units") representing Company Common Shares ("Shares") which the deferred amount would purchase at the closing price for the Shares on the New York Stock Exchange ("NYSE") composite transactions reporting system ("composite tape") on the date that the deferred amount is credited pursuant to paragraph (a) and if Shares were not traded on that date on the NYSE, then such computation shall be made as of the first preceding day on which Shares were so traded. The Company shall credit the Participant's Stock Deferral Account with the number of full and fractional Units so determined. However, at no time prior to delivery of such Shares, shall the Company be obligated to purchase or reserve Shares for such Stock Deferral Account and the Participant shall not have any of the rights of a shareholder with respect to the Units credited to such Participant's Stock Deferral Account. (d) As of each dividend payment date declared with respect to the Shares, the Company shall credit the Participant's Stock Deferral Account with an additional number of whole and/or fractional Units equal to: (i) the product of (x) the dividend per Share which is payable with respect to such dividend payment date, multiplied by (y) 2 3 the number of whole and fractional Units credited to the Participant's Stock Deferral Account as of such payment date; divided by ---------- (ii) the closing price of a Share on the dividend payment date (or if Shares were not traded on that date, on the next preceding day on which Shares were so traded), as reported on the NYSE-composite tape. 5. PAYMENT OF DEFERRED COMPENSATION UPON CEASING TO BE A DIRECTOR. (a) The total amount standing as a credit in a Participant's Cash Deferral Accounts shall, upon Participant ceasing to be a director, be payable to the Participant either in a lump sum or in periodic installments over such period, not exceeding ten years, as the Participant shall have selected pursuant to Section 3(b)(iv). Such periodic payments shall begin or the lump sum payment shall be made, as the case may be, from the Participant's Cash Deferral Accounts, at such time, not more than twelve (12) months after the Participant ceases to be a director of the Company, as the Participant shall have selected pursuant to Section 3 (b)(iv). Notwithstanding the foregoing, a Participant may elect no later than thirty (30) days prior to the Participant ceasing to be a director, nor earlier than ninety (90) days prior thereto, to change the form of distribution of the Participant's Cash Deferral Accounts. (b) The amount of each installment payable to a Participant shall be determined by dividing the aggregate balance of such Participant's Cash Deferral Accounts by the number of periodic installments (including the current installment) remaining to be paid. Until a Participant's Cash Deferral Accounts has been completely distributed, the balance thereof remaining, from time to time, shall be credited with gains and losses on a monthly basis as provided in Section 4(b). (c) The total number of Units credited to the Participant's Stock Deferral Accounts shall, upon Participant ceasing to be a director, be payable to the Participant either in a lump sum or in periodic installments, over such period, not exceeding ten years, as the Participant shall have selected pursuant to Section 3(b)(iv). Such periodic payments shall begin or the lump sum payment shall be made, as the case may be, at such time, not more than twelve (12) months after the Participant ceased to be a director of the Company, as the Participant shall have selected pursuant to Section 3(b)(iv). Notwithstanding the foregoing, a Participant may elect no later than thirty (30) days prior to the Participant ceasing to be a director, no earlier than ninety (90) days prior thereto, to change the form of distribution of the Participant's Stock Deferral Accounts. (d) The amount of any installment payable from the Stock Deferral Accounts to a Participant shall be determined by dividing the balance of the 3 4 aggregate number of Units in the Participant's Stock Deferral Accounts by the number of periodic installments (including the current installment) remaining to be paid and the quotient shall be the number of Shares that are payable. If the determination of the installment payable from the Participant's Stock Deferral Accounts results in a fractional Share being payable, the installment payment shall exclude any such fractional Share payment except that, in the final installment payment, any such fractional Share shall be paid in cash in an amount as determined by the Committee. Until the Participant's Stock Deferral Accounts have been completely distributed, the balance in the Stock Deferral Accounts shall continue to be credited with the dividend equivalents on such balances as provided in Section 4(d). (e) In the event a Participant dies prior to receiving payment of the entire amount in that Participant's Cash Deferral Accounts and/or Stock Deferral Accounts, as the case may be, the unpaid balance shall be paid to such beneficiary as the Participant may have designated in writing to the Vice President, Human Resources, of the Company as the beneficiary to receive any such post-death distribution under the Plan or, in the absence of such written designation, to the Participant's legal representative or to the beneficiary designated in the Participant's last will as the one to receive such distributions. Distributions subsequent to the death of a Participant may be made either in a lump sum or in periodic installments in such amounts and over such period, not exceeding ten years from the date of death, as the Committee may direct and the amount of each installment shall be computed as provided in Section 6(b), and (d) as the case may be. (f) Payments from the Cash Deferral Accounts shall be made in cash and payments from the Stock Deferral Accounts shall be made in Shares. The amount of any distribution pursuant to Sections 5 through 8 hereunder shall reduce the balance held in the Participant's corresponding Deferral Accounts as of the date of such distribution. Installment payments shall be made pro-rata from a Participant's Deferral Accounts. 6. IN-SERVICE DISTRIBUTIONS. Pursuant to Section 3, a Participant may elect to receive an in-service distribution of all or any specified percentage of the Participant's deferral for any calendar quarter commencing not earlier than the first calendar year following the year that such compensation would have been payable. In-service distributions shall be made in a lump sum payment. A Participant may elect once for any calendar quarter of deferral for which the Participant has elected an in-service distribution, to change the date of distribution to another in-service year or upon ceasing to be director; provided, however, that any such modification must be made in writing at least twelve (12) months prior to the date originally elected for the in-service distribution. 7. SPECIAL DISTRIBUTIONS. Notwithstanding any other provision of this Plan, a Participant may elect to receive distribution of part or all of the total of Participant's eligible Deferral Accounts in one or more distributions if (and only if) 4 5 the amount of the distribution is reduced by ten (10) percent. The ten (10) percent reduction shall be forfeited. Distributions shall be made pro-rata among Participant's eligible Deferral Accounts. Any distribution made pursuant to such an election shall be made within sixty (60) days of the date such election is submitted to Vice President - Human Resources. 8. HARDSHIP DISTRIBUTIONS. The Committee may accelerate the distribution of part or all, in any or all, of Participant's Deferral Accounts for reasons of severe financial hardship. For purposes of this Plan, severe financial hardship shall be deemed to exist in the event the Committee determines that a Participant needs a distribution to meet immediate and heavy financial needs resulting from a sudden or unexpected illness or accident of the Participant or a member of his/her family, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstance arising as a result of events beyond the control of the Participant. A distribution based on financial hardship shall not exceed the amount required to meet the immediate financial need created by the hardship. 9. NON-ASSIGNABILITY. None of the rights or interests in any of the Participant's Deferral Accounts shall, prior to actual payment or distribution pursuant to this Plan, be assignable or transferable in whole or in part, either voluntarily or by operation of law or otherwise, and such rights and interest shall not be subject to payment of debts by execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner; provided that, upon the occurrence of any such assignment or transfer or the attempted assignment or transfer, all payments hereunder shall be payable in the sole and unrestricted judgment and discretion of the Committee, as to time and amount, and shall be distributable to the person who would have received the payment but for this paragraph 9 only at such time or times and in such amounts as the Committee, from time to time, shall determine. 10. INTEREST OF PARTICIPANT. The Company shall be under no obligation to segregate or reserve any funds or other assets for purposes relating to the Plan and, except as set forth in this Plan, no Participant shall have any rights whatsoever in or with respect to any funds or other assets held by the Company for purposes of the Plan or otherwise. Each Participant's accounts maintained for purposes of the Plan merely constitute bookkeeping entries on records of the Company, constitute the unsecured promise and obligation of the Company to make payments as provided herein, and shall not constitute any allocation whatsoever of any cash, shares or other assets of the Company or be deemed to create any trust or special deposit with respect to any of the Company's assets. Notwithstanding the foregoing provisions, nothing in this Plan shall preclude the Company from setting aside Shares or funds in trust pursuant to one or more trust agreements between a trustee and the Company. However, no Participant shall have any secured interest or claim in any assets or property 5 6 of the Company or any such trust and all Shares or funds contained in such trust shall remain subject to the claims of the Company's general creditors. 11. SHARES CHANGES. In the event of any change in the number of outstanding Shares by reason of any stock dividend, stock split up, recapitalization, merger, consolidation, exchange of shares or other similar corporate change, the number of units representing Shares to be credited in accordance with Section 4(c), the Shares to be distributed in accordance with this Plan shall be appropriately adjusted to take into account any such event. 12. AMENDMENT. The Board of Directors of the Company may, from time to time, amend or terminate this Plan, provided that no such amendment or termination of the Plan shall adversely affect a Participant's Accounts as they existed immediately before such amendment or termination or the manner of distribution thereof, unless such Participant shall have consented thereto in writing. 6 EX-10.H 3 EXHIBIT 10(H) 1 Exhibit (10)(h) THE LUBRIZOL CORPORATION 1991 STOCK INCENTIVE PLAN (As Amended March 27, 2000) SECTION 1. PURPOSE. The purposes of The Lubrizol Corporation 1991 Stock Incentive Plan are to encourage selected employees of The Lubrizol Corporation and its Subsidiaries and directors of the Company to acquire a proprietary and vested interest in the growth and performance of the Company, to generate an increased incentive to contribute to the Company's future success and prosperity, thus enhancing the value of the Company for the benefit of shareholders, and to enhance the ability of the Company and its Subsidiaries to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability of the Company depends. SECTION 2. DEFINITIONS. As used in the Plan, the following terms shall have the meanings set forth below: (a) "Award" means any Option, Stock Appreciation Right, Restricted Stock Award, or Stock Award granted pursuant to the provisions of the Plan. (b) "Award Agreement" means a written document evidencing any Award granted hereunder, signed by the Company and delivered to the Participant or Outside Director, as the case may be. (c) "Board" means the Board of Directors of the Company. (d) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (e) "Committee" means a committee of not less than three (3) Outside Directors of the Board, each of whom shall be a "disinterested person" within the meaning of Rule 16b-3(d)(3) promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any successor rule or statute. (f) "Company" means The Lubrizol Corporation. (g) "Employee" means any employee of the Company or of any Subsidiary. (h) "Fair Market Value" means the average of the high and low price of a Share on the New York Stock Exchange on the Grant Date (in the case of a Grant), or any other relevant date. (i) "Grant Date" means the date on which the Board approves the grant of an Option, Stock Appreciation Right, Restricted Stock Award, or Stock Award, and, with respect to an Option granted to an Outside Director pursuant to Section 10, the date of the Shareholders' Meeting on which such Option is granted. 2 THE LUBRIZOL CORPORATION Page 2 1991 STOCK INCENTIVE PLAN (j) "Incentive Stock Option" means an Option that is intended to meet the requirements of Section 422A of the Code or any successor provision thereto. (k) "Non-Statutory Stock Option" means an Option that is not intended to be an Incentive Stock Option. (l) "Option" means an option to purchase Shares granted hereunder. (m) "Option Price" means the purchase price of each Share under an Option. (n) "Outside Director" means a member of the Board who is not an employee of the Company or of any Subsidiary. (o) "Participant" means an Employee who is selected by the Committee to receive an Award under the Plan. (p) "Plan" means The Lubrizol Corporation 1991 Stock Incentive Plan. (q) "Restricted Stock Award" means an award of restricted Shares under Section 8 hereof. (r) "Restriction Period" means the period of time specified in an Award Agreement during which the following conditions remain in effect: (i) certain restrictions on the sale or other disposition of Shares awarded under the Plan, (ii) subject to the terms of the applicable Award Agreement, the continued employment of the Participant, and (iii) such other conditions as may be set forth in the applicable Award Agreement. (s) "Shareholders' Meeting" means the annual meeting of shareholders of the Company in each year. (t) "Shares" means common shares without par value of the Company. (u) "Stock Appreciation Right" means the right to receive a payment in cash or in Shares, or in any combination thereof, from the Company equal to the excess of the Fair Market Value of a stated number of Shares at the exercise date over a fixed price for such Shares. (v) "Stock Award" means the grant of unrestricted Shares under the Plan. (w) "Subsidiary" means a corporation which is at least 80% owned, directly or indirectly, by the Company. (x) "Voting Stock" means the then-outstanding securities entitled to vote generally in the election of directors of the Company. 3 THE LUBRIZOL CORPORATION Page 3 1991 STOCK INCENTIVE PLAN SECTION 3. ADMINISTRATION. The Plan shall be administered by the Committee. Members of the Committee shall be appointed by and serve at the pleasure of the Board, and may resign by written notice filed with the Chairman of the Board or the Secretary of the Company. A vacancy on the Committee shall be filled by the appointment of a successor member by the Board. Subject to the express provisions of this Plan, the Committee shall have conclusive authority to select Employees to be Participants for Awards and determine the type and number of Awards to be granted, to construe and interpret the Plan, any Award granted hereunder, and any Award Agreement entered into hereunder, and to establish, amend, and rescind rules and regulations for the administration of this Plan and shall have such additional authority as the Board may from time to time determine to be necessary or desirable. Notwithstanding the foregoing, the Committee shall not have discretion with respect to Options granted to Outside Directors pursuant to Section 10 such as to prevent any Award granted under this Plan from meeting the requirements for exemption from Section 16(b) of the Exchange Act, as set forth in Rule 16b-3 thereunder or any successor rule or statute. SECTION 4. SHARES SUBJECT TO THE PLAN. (a) Subject to adjustment as provided in the Plan, the total number of Shares available under the Plan in each calendar year shall be one percent (1%) of the total outstanding Shares as of the first day of any year for which the Plan is in effect; provided that such number shall be increased in any year by the number of Shares available for grant hereunder in previous years but not covered by Awards granted hereunder in such previous years; provided further, that a total of no more than two million (2,000,000) Shares shall be available for the grant of Incentive Stock Options under the Plan; and provided further, that no more than four hundred thousand (400,000) Shares shall be available for grant to any Participant during a calendar year. Settlement of an Award, whether by the issuance of Shares or the payment of cash, shall not be deemed to be the grant of an Award hereunder. In addition, any Shares issued by the Company through the assumption or substitution of outstanding grants from an acquired company shall not reduce the Shares available for grants under the Plan. Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued Shares or treasury shares. If any Shares subject to any Award granted hereunder are forfeited or if such Award otherwise terminates without the issuance of such Shares or payment of other consideration in lieu of such Shares, the Shares subject to such Award, to the extent of any such forfeiture or termination, shall again be available for grant under the Plan as if such Shares had not been subject to an Award. (b) The number of Shares which remain available for grant pursuant to this Plan, together with Shares subject to outstanding Awards, at the time of any change in the Company's capitalization, including stock splits, stock dividends, mergers, reorganizations, consolidations, recapitalizations, or other changes in corporate structure, shall be appropriately and proportionately adjusted to reflect such change in capitalization. SECTION 5. ELIGIBILITY. Any Employee shall be eligible to be selected as a Participant. 4 THE LUBRIZOL CORPORATION Page 4 1991 STOCK INCENTIVE PLAN SECTION 6. STOCK OPTIONS. Non-Statutory Stock Options and Incentive Stock Options may be granted hereunder to Participants either separately or in conjunction with other Awards granted under the Plan. Any Option granted to a Participant under the Plan shall be evidenced by an Award Agreement in such form as the Committee may from time to time approve. Any such Option shall be subject to the following terms and conditions and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall deem desirable. (a) OPTION PRICE. The purchase price per Share under an Option shall be fixed by the Committee in its sole discretion; provided that the purchase price shall not be less than one hundred percent (100%) of the Fair Market Value of the Share on the Grant Date of the Option. Payment of the Option Price may be made in cash, Shares, or a combination of cash and Shares, as provided in the Award Agreement relating thereto. (b) OPTION PERIOD. The term of each Option shall be fixed by the Committee in its sole discretion; provided that no Incentive Stock Option shall be exercisable after the expiration of ten years from the Grant Date; and provided further, that no reload Option granted to a Participant pursuant to the terms of Section 6(e) shall be exercisable after the expiration of the term of the Option that gave rise to the grant of such reload Option. (c) EXERCISE OF OPTION. Options shall be exercisable to the extent of fifty percent (50%) of the Shares subject thereto after one year from the Grant Date, seventy-five percent (75%) of such Shares after two years from the Grant Date, and one hundred percent (100%) of such Shares after three years from the Grant Date, subject to any provisions respecting the exercisability of Options that may be contained in an Award Agreement; provided that a reload Option granted to a Participant pursuant to the terms of Section 6(e) shall be exercisable to the extent of one hundred percent (100%) of such Shares from the Grant Date. (d) INCENTIVE STOCK OPTIONS. The aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options held by any Participant which are exercisable for the first time by such Participant during any calendar year under the Plan (and under any other benefit plans of the Company, of any parent corporation, or Subsidiary) shall not exceed $100,000 or, if different, the maximum limitation in effect at the Grant Date under Section 422A of the Code, or any successor provision, and any regulations promulgated thereunder. The terms of any Incentive Stock Option granted hereunder shall comply in all respects with the provisions of Section 422A of the Code, or any successor provision, and any regulations promulgated thereunder. (e) RELOAD. In the event that a Participant or an Outside Director exercises an Option other than a reload Option granted pursuant to this Section 6(e), and pays some or all of the Option Price with Shares, the Committee in its discretion may grant to such Participant or Outside Director a reload Option to purchase the number of Shares equal to the number of Shares used as payment of the Option Price, subject to the limitations described below. Options granted to Participants pursuant to this Section 6(e) shall have terms and conditions as described in this Section 6 and Options granted to Outside Directors pursuant to this Section 6(e) shall have terms and conditions as described in 5 THE LUBRIZOL CORPORATION Page 5 1991 STOCK INCENTIVE PLAN Section 10. Options granted pursuant to this Section 6(e) shall be of the same character (i.e., Non-Statutory Stock Options or Incentive Stock Options) as the Option that is exercised to give rise to the grant of the reload Option, provided that if an Incentive Stock Option cannot be granted under this Section 6(e) in compliance with Section 422A of the Code, then a Non-Statutory Stock Option shall be granted in lieu thereof. Options may be granted pursuant to this Section 6(e) only to the extent that the number of Shares covered by such Option grants does not, when added to the number of Shares covered by Awards previously granted during such calendar year, exceed the limitation set forth in Section 4(a). Shares received upon the exercise of an Option granted pursuant to this Section 6(e) may not be sold or otherwise transferred (i) by a Participant until such Participant has met the Share ownership guideline for such Participant, if any, set by the Company, and then only to the extent that the Participant continues to meet such ownership guideline immediately after such sale, or (ii) by an Outside Director until such Outside Director ceases to be an Outside Director, provided, however, that a Participant or Outside Director may use such Shares as payment of the Option Price of Options granted under this Plan to the extent permitted by the applicable Award Agreement, in which case a number of the Shares (equal to the number of Shares used for such payment) purchased by the exercise of such Options also shall be subject to the same restrictions upon transferability. Certificates for such Shares with a transferability restriction shall bear a legend referencing such restriction. SECTION 7. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be granted hereunder to Participants either separately or in conjunction with other Awards granted under the Plan and may, but need not, relate to a specific Option granted under Section 6. The provisions of Stock Appreciation Rights need not be the same with respect to each Participant. Any Stock Appreciation Right related to a Non-Statutory Stock Option may be granted at the same time such Option is granted or at any time thereafter before exercise or expiration of such Option. Any Stock Appreciation Right related to an Incentive Stock Option must be granted at the same time such Option is granted. Any Stock Appreciation Right related to an Option shall be exercisable only to the extent the related Option is exercisable. In the case of any Stock Appreciation Right related to any Option, the Stock Appreciation Right or applicable portion thereof shall terminate and no longer be exercisable upon the termination or exercise of the related Option. Similarly, upon exercise of a Stock Appreciation Right as to some or all of the Shares covered by a related Option, the related Option shall be canceled automatically to the extent of the Stock Appreciation Rights exercised, and such Shares shall not thereafter be eligible for grant under Section 4(a). The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it shall deem appropriate. SECTION 8. RESTRICTED STOCK AWARDS. (a) ISSUANCE. Restricted Stock Awards may be issued hereunder to Participants, either separately or in conjunction with other Awards granted under the Plan. Each Award under this Section 8 shall be evidenced by an Award Agreement between the Participant and the Company which shall specify the vesting schedule, any rights of acceleration and 6 THE LUBRIZOL CORPORATION Page 6 1991 STOCK INCENTIVE PLAN such other terms and conditions as the Board shall determine, which need not be the same with respect to each Participant. (b) REGISTRATION. Shares issued under this Section 8 shall be evidenced by issuance of a stock certificate or certificates registered in the name of the Participant bearing the following legend and any other legend required by, or deemed appropriate under, any federal or state securities laws: The sale or other transfer of the common shares represented by this certificate is subject to certain restrictions set forth in the Award Agreement between ___________________ (the registered owner) and The Lubrizol Corporation dated _______________, under The Lubrizol Corporation 1991 Stock Incentive Plan. A copy of the Plan and Award Agreement may be obtained from the Secretary of The Lubrizol Corporation. Unless otherwise provided in the Award Agreement between the Participant and the Company, such certificates shall be retained by the Company until the expiration of the Restriction Period. Upon the expiration of the Restriction Period, the Company shall (i) cause the removal of the legend from the certificates for such Shares as to which a Participant is entitled in accordance with the Award Agreement between the Participant and the Company and (ii) release such Shares to the custody of the Participant. (c) FORFEITURE. Except as otherwise determined by the Committee at the Grant Date, upon termination of employment of the Participant for any reason during the Restriction Period, all Shares still subject to restriction shall be forfeited by the Participant and retained by the Company; provided that in the event of a Participant's retirement, permanent disability, death, or in cases of special circumstances, the Committee may, in its sole discretion, when it finds that a waiver would be in the best interests of the Company, waive in whole or in part any or all remaining restrictions with respect to such Participant's Shares. In such case, unrestricted Shares shall be issued to the Participant at such time as the Committee determines. (d) RIGHTS AS SHAREHOLDERS. At all times during the Restriction Period, Participants shall be entitled to full voting rights with respect to all Shares awarded under this Section 8 and shall be entitled to dividends with respect to such Shares. SECTION 9. STOCK AWARDS. Awards of Shares may be granted hereunder to Participants, either separately or in conjunction with other Awards granted under the Plan. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine (i) the Employees to whom such Awards shall be granted, (ii) the time or times at which such Awards shall be granted, (iii) the number of Shares to be granted pursuant to such Awards, and (iv) all other conditions of the Awards. Such conditions may include issuance of Shares at the time of the Award is granted or issuance of Shares at a time or times subsequent to the time the Award is granted, which subsequent times may be specifically established by the Committee and/or may be determined by reference to the satisfaction of one or more performance measures specified by the Committee. The provisions of stock awards need not be the same with respect to each Participant. 7 THE LUBRIZOL CORPORATION Page 7 1991 STOCK INCENTIVE PLAN SECTION 10. OUTSIDE DIRECTORS' OPTIONS. On the close of business on the date of each Shareholders' Meeting, each Outside Director shall automatically be granted an Option to purchase 2,500 Shares. All such Options shall be Non-Statutory Stock Options and shall be subject to the following terms and conditions and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as are contained in the applicable Award Agreement. (a) OPTION PRICE. The purchase price per Share shall be one hundred percent (100%) of the Fair Market Value of the Share on the Grant Date. Payment of the Option Price may be made in cash, Shares, or a combination of cash and Shares, as provided in the Award Agreement in effect from time to time. (b) OPTION PERIOD. The term during which Options granted under this Section 10 shall be exercisable shall be ten (10) years from the Grant Date; provided that no reload Option granted to an Outside Director pursuant to the terms of Section 6(e) shall be exercisable after the expiration of the term of the Option that gave rise to the grant of such reload Option. (c) EXERCISE OF OPTIONS. Subject to the provisions of this Section 10(c), Options shall be exercisable to the extent of fifty percent (50%) of the Shares subject thereto after one year from the Grant Date, seventy-five percent (75%) of such Shares after two years from the Grant Date, and one hundred percent (100%) of such Shares after three years from the Grant Date; provided that a reload Option granted to an Outside Director pursuant to the terms of Section 6(e) shall be exercisable to the extent of one hundred percent (100%) of such Shares from the Grant Date. Options may be exercised by an Outside Director during the period that the Outside Director remains a member of the Board and under the circumstances described below. (i) If an Outside Director retires under a retirement plan or policy of the Company, then Options held by such Outside Director may be exercised for a period of thirty-six (36) months following retirement, to the extent of 100% of the Shares covered by such Options (notwithstanding the extent to which the Outside Director otherwise would have been entitled to exercise such Options at the date of retirement), provided that in no event shall an Option be exercisable after the expiration of the Option period provided in Section 10(b). (ii) In the event of the death of an Outside Director while serving as a director, Options held by such Outside Director may be exercised for a period of twelve (12) months following the date of death, (A) to the extent of 100% of the Shares covered by such Options (notwithstanding the extent to which the Outside Director otherwise would have been entitled to exercise the Option at the date of death), and (B) only by the executor or administrator of the Outside Director's estate or by the person or persons to whom the Outside Director's rights under the Options shall pass by the Outside Director's will or the laws of descent and distribution, provided that in no event shall an Option be exercisable after the expiration of the Option period provided in Section 10(b). 8 THE LUBRIZOL CORPORATION Page 8 1991 STOCK INCENTIVE PLAN (iii) If an Outside Director shall cease to be a director for any reason other than retirement under a retirement plan or policy of the Company or death, Options held by such Outside Director may be exercised for a period of three (3) months following such cessation, to the extent of 100% of the Shares covered by such Options (notwithstanding the extent to which the Outside Director otherwise would have been entitled to exercise such Options at the date of such cessation), provided that in no event shall an Option be exercisable after the expiration of the Option period provided in Section 10(b). (iv) In the event an Outside Director, after ceasing to be a director, dies during and subject to one of the periods described in Section 10(c)(i) or (iii), while possessed of unexercised Options, the executor or administrator of the Outside Director's estate, or the person entitled by will or the applicable laws of descent and distribution, may exercise such Options held by the Outside Director at the time of the Outside Director's death during the period that is applicable, as follows: (A) If Section 10(c)(i) was in effect, for one year after the Outside Director's death; (B) If Section 10(c)(iii) was in effect, for three months after the Outside Director's death; provided that, in no event shall the Option be exercisable after the expiration of the Option period provided in Section 10(b). SECTION 11. CHANGE IN CONTROL. Notwithstanding the provisions of Sections 6(c) and 10(c), Options shall become exercisable with respect to 100% of the Shares upon the occurrence of any Change in Control (as hereafter defined) of the Company; except that no Options shall be exercised prior to the end of six months from the Grant Date. Notwithstanding the provisions of Section 8 and the applicable Award Agreement, any restricted Shares shall be 100% vested and without any restrictions upon the occurrence of any Change in Control of the Company. For all purposes of the Plan, a "Change in Control" shall have occurred if any of the following events shall occur: (a) The Company is merged, consolidated or reorganized into or with another corporation or other legal person, and immediately after such merger, consolidation or reorganization less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such transaction are held in the aggregate by the holders of Voting Stock of the Company immediately prior to such transaction; 9 THE LUBRIZOL CORPORATION Page 9 1991 STOCK INCENTIVE PLAN (b) The Company sells all or substantially all of its assets to any other corporation or other legal person, and less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such sale are held in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale; (c) There is a report filed on Schedule 13D or Schedule 14D-l (or any successor schedule, form or report), each as promulgated pursuant to the Exchange Act, disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13(d)(3) or any successor rule or regulation promulgated under the Exchange Act) of securities representing 20% or more of the Voting Stock; (d) The Company files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Company has or may have occurred or will or may occur in the future pursuant to any then-existing contract or transaction; or (e) If during any period of two consecutive years, individuals who at the beginning of any such period constitute the Directors of the Company cease for any reason to constitute at least a majority thereof, provided, however, that for purposes of this Section 11(e), each Director who is first elected, or first nominated for election by the Company's stockholders, by a vote of at least two thirds of the Directors of the Company (or a committee thereof) then still in office who were Directors of the Company at the beginning of any such period will be deemed to have been a Director of the Company at the beginning of such period. Notwithstanding the foregoing provisions of Section 11(c) or 11(d) hereof, unless otherwise determined in a specific case by majority vote of the Board, a "Change in Control" shall not be deemed to have occurred for purposes of the Plan solely because (i) the Company, (ii) an entity in which the Company directly or indirectly beneficially owns 50% or more of the voting securities, or (iii) any employee stock ownership plan or any other employee benefit plan sponsored by the Company, either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-l, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act, disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 20% or otherwise, or because the Company reports that a change in control of the Company has or may have occurred or will or may occur in the future by reason of such beneficial ownership. SECTION 12. AMENDMENTS AND TERMINATION. The Board may, at any time, amend, alter or terminate the Plan, but no amendment, alteration, or termination shall be made that would impair the rights of an Outside Director or Participant under an Award theretofore granted, without the Outside Director's or Participant's consent, or that without the approval of the shareholders would: 10 THE LUBRIZOL CORPORATION Page 10 1991 STOCK INCENTIVE PLAN (a) except as is provided in Sections 4(b) and 13(c) of the Plan, increase the total number of Shares which may be issued under the Plan; (b) change the class of employees eligible to participate in the Plan; or (c) materially increase the benefits accruing to Participants under the Plan; so long as such approval is required by law or regulation; provided that, as long as required by law or regulation, the provisions of Section 10 hereof may not be amended or altered more than once every six (6) months, other than to comport with changes in the Code, the Employee Retirement Income Security Act, or the rules thereunder. The Committee may amend the terms of any Award heretofore granted (except, with respect to Options granted pursuant to Section 10 hereof, only to the extent not inconsistent with Rule 16b-3 under the Exchange Act or any successor rule or statute), prospectively or retroactively, but no such amendment shall impair the rights of any Participant or Outside Director without his consent. SECTION 13. GENERAL PROVISIONS. (a) No Option, Stock Appreciation Right, or Restricted Stock Award shall be assignable or transferable by a Participant or an Outside Director otherwise than by will or the laws of descent and distribution, and Options and Stock Appreciation Rights may be exercised during the Participant's or Outside Director's lifetime only by the Participant or the Outside Director or, if permissible under applicable law, by the guardian or legal representative of the Participant or Outside Director. (b) The term of each Award shall be for such period of months or years from its Grant Date as may be determined by the Committee or as set forth in the Plan; provided that in no event shall the term of any Incentive Stock Option or any Stock Appreciation Right related to any Incentive Stock Option exceed a period of ten (10) years from the Grant Date. (c) In the event of a merger, reorganization, consolidation, recapitalization, stock dividend or other change in corporate structure such that Shares are changed into or become exchangeable for a larger or smaller number of Shares, thereafter the number of Shares subject to outstanding Awards granted to Participants and to any Shares subject to Awards to be granted to Participants pursuant to this Plan shall be increased or decreased, as the case may be, in direct proportion to the increase or decrease in the number of Shares by reason of such change in corporate structure; provided, however, that the number of Shares shall always be a whole number, and the purchase price per Share of any outstanding Options shall, in the case of an increase in the number of Shares, be proportionately reduced, and, in the case of a decrease in the number of Shares, shall be proportionately increased. The above adjustment shall also apply to any Shares subject to Options granted to Outside Directors pursuant to the provisions of Section 10. 11 THE LUBRIZOL CORPORATION Page 11 1991 STOCK INCENTIVE PLAN (d) No Employee shall have any claim to be granted any Award under the Plan and there is no obligation for uniformity of treatment of Employees or Participants under the Plan. (e) The prospective recipient of any Award under the Plan shall not, with respect to such Award, be deemed to have become a Participant, or to have any rights with respect to such Award, until and unless such recipient shall have executed an Award Agreement, and otherwise complied with the then applicable terms and conditions. (f) All certificates for Shares delivered under the Plan pursuant to any Award shall be subject to such stock-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (g) Except as otherwise required in any applicable Award Agreement or by the terms of the Plan, Participants shall not be required, under the Plan, to make any payment other than the rendering of services. (h) The Company shall be authorized to withhold from any payment under the Plan, whether such payment is in Shares or cash, all withholding taxes due in respect of such payment hereunder and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. (i) Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. (j) Nothing in the Plan shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant's employment at any time, nor shall the Plan confer upon any Participant any right to continued employment with the Company or any Subsidiary. SECTION 14. EFFECTIVE DATE AND TERM OF PLAN. The Plan shall be effective as of April 22, 1991, and shall continue in effect until terminated by the Board. EX-10.I 4 EXHIBIT 10(I) 1 Exhibit (10)(i) THE LUBRIZOL CORPORATION DEFERRED STOCK COMPENSATION PLAN FOR OUTSIDE DIRECTORS Adopted: September 17, 1991 Amended: September 27, 1993 Amended: October 1, 1995 Amended: September 27, 1999 Amended: February 28, 2000 1. PURPOSE. The Lubrizol Corporation (the "Company") hereby establishes its Deferred Stock Compensation Plan for Outside Directors (the "Plan") in order to promote the interests of the Company and its shareholders by having a portion of the total compensation payable to its outside directors be deferred and paid in the form of common shares of the Company, thereby increasing each Director's beneficial ownership of Company common shares as well as each Director's proprietary interest in the Company. 2. EFFECTIVE DATE. The effective date of the plan is October 1, 1991. 3. COMMON SHARE UNITS. In addition to the cash compensation otherwise payable to each outside director of the Company, the Company shall establish and maintain a Deferred Stock Account for and in the name of each outside director. Subject to the provisions of Section 10, on the first day of October in each calendar year, the Company shall credit 500 common share units ("Units") to the Deferred Stock Account of each person who is an outside director of the Company on said date. 4. DIVIDEND EQUIVALENTS. As of each dividend payment date declared with respect to the Company's common shares, the Company shall credit the Deferred Stock Account of each director with an additional number of Units equal to: (a) the product of (i) the dividend per common share of the Company which is payable with respect to such dividend payment date, multiplied by (ii) the number of Units credited to the director's Deferred Stock Account as of such dividend payment date; divided by ---------- (b) the closing price of a common share of the Company on the dividend payment date (or if such stock was not traded on that date, on the next preceding date on which such common shares were traded), as reported by the New York Stock Exchange - Composite Transactions Reporting System. 5. DISTRIBUTION OF COMMON SHARES (a) Each director, or, in the event of death, his/her beneficiary, shall be entitled to receive one common share of the Company (a "Share" or "Shares") for each -1- 2 Unit credited to his/her Deferred Stock Account, payable at such time or times as hereinafter provided. Once a Share has been distributed with respect to a Unit, that Unit shall be canceled. (b) Unless otherwise elected by the director in accordance with the provisions of Section 5(c), all Shares shall be distributed to the director or beneficiary, as the case may be, on the first day of the month following the date on which the director ceases to be a director for any reason. (c) At any time prior to the first time that the Company credits Units to the director's Deferred Stock Account, the director may irrevocably elect to have all Shares to which the director will be entitled under this Plan distributed to him/her (or in the event of his/her death, the director's designated beneficiary) in ten or fewer annual installments commencing on the first day of the month following the date on which such director ceases to be a director of the Company for any reason. The number of Shares to be distributed with each installment shall be equal to the nearer whole number obtained by dividing the number of Units then credited to the director's Deferred Stock Account by the number of unpaid installments. (d) Units with respect to which no distribution of Shares has yet occurred shall continue to be held in the director's Deferred Stock Account and credited with dividend equivalents in accordance with Section 4. 6. BENEFICIARY DESIGNATION (a) Each director may, from time to time, by writing filed with the Company, designate any legal or natural person or persons (who may be designated contingently or successively) to whom Shares attributable to the director's Units are to be distributed if the director dies prior to having received all of such Shares to which he/she is entitled under Section 5. A beneficiary designation will be effective only if the signed form is filed with the Company while the director is alive and will cancel all beneficiary designation forms filed earlier. (b) To the extent that a director fails to designate a beneficiary or beneficiaries as provided in this Section 6, or if all designated beneficiaries die before the director or before the distribution of all Shares attributable to the director's Units, all remaining Shares attributable to such Units shall be distributed to the estate of the director as soon as practicable after such death. 7. ACCELERATION OF SHARE DISTRIBUTIONS. The Company may accelerate the distribution of Shares with respect to Units credited to the Deferred Stock Account of any director for reasons of severe financial hardship. For purposes of this Plan, severe financial hardship shall be deemed to exist in the event the Company determines that a director needs a distribution to meet immediate and heavy financial needs resulting from a sudden or unexpected illness or accident of the director or a member of his/her family, loss of the director's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the director. A distribution based on financial hardship shall not exceed the amount required to meet the immediate financial need created by the hardship. -2- 3 8. TRANSFERABILITY. The interests of any director or beneficiary under the Plan are not subject to the claims of the director's creditors and may not otherwise be voluntarily or involuntarily assigned, alienated or encumbered. 9. INTEREST OF DIRECTOR. The Company shall be under no obligation to segregate or reserve any funds or other assets for purposes relating to the Plan and, except as set forth in this Plan, no director shall have any rights whatsoever in or with respect to any funds or other assets held by the Company for purposes of the Plan or otherwise. Each director's Deferred Stock Account maintained for purposes of the Plan merely constitutes a bookkeeping entry on records of the Company, constitutes the unsecured promise and obligation of the Company to make payments as provided herein, and shall not constitute any allocation whatsoever of any cash or other assets of the Company or be deemed to create any trust or special deposit with respect to any of the Company's assets. Notwithstanding the foregoing provisions, nothing in this Plan shall preclude the Company from setting aside Shares or funds in trust pursuant to one or more trust agreements between a trustee and the Company. However, no director shall have any secured interest or claim in any assets or property of the Company or any such trust and all Shares or funds contained in such trust shall remain subject to the claims of the Company's general creditors. 10. CHANGES IN SHARES. In the event of any change in the number of outstanding Shares by reason of any stock dividend, stock split up, recapitalization, merger, consolidation, exchange of shares or other similar corporate change, the number of Units to be credited in accordance with Section 3, the number of Units held in the director's Deferred Stock Account and the Shares to be distributed in accordance with this Plan shall be appropriately adjusted to take into account any such event. 11. SUCCESSORS. This Plan shall be binding upon any assignee or successor in interest to the Company whether by merger, consolidation or sale of all or substantially all of the Company's assets. 12. AMENDMENT AND TERMINATION. The Board of Directors of the Company may, from time to time, amend or terminate the Plan; provided, however, that no such amendment or termination shall adversely affect the rights of any director or beneficiary without his/her consent with respect to Units credited prior to such amendment or termination. -3- EX-10.K 5 EXHIBIT 10(K) 1 Exhibit (10)(k) THE LUBRIZOL CORPORATION Deferred Compensation Plan for Officers --------------------------------------- (Amended as of March 11, 2000) 1. PURPOSE. The purpose of this Deferred Compensation Plan For Officers (the "Plan") is to permit an officer (as identified by the Company for Section 16 purposes under the Securities Exchange Act of 1934) (sometimes hereinafter referred to as "officer" or as the "Participant") of The Lubrizol Corporation (the "Company"), who wishes, to defer a portion of such officer's compensation as provided in the Plan. 2. ADMINISTRATION. The Plan shall be administered by the Organization and Compensation Committee of the Board of Directors of the Company (the "Committee"). The Committee's interpretation and construction of all provisions of the Plan shall be binding and conclusive upon all Participants and their heirs and/or successors. 3. RIGHT TO DEFER COMPENSATION. (a) An officer of the Company may, at any time prior to January 1 of a given calendar year, elect, for one or more future successive calendar years, to defer under the Plan a pre-selected amount of such officer's cash compensation, including bonus, which such officer may thereafter be entitled to receive for services performed during such elected calendar year or years. (b) The election under this Section 3 shall take effect on the first day of the calendar year following the date on which the election is made and such election shall be irrevocable for any elected calendar year after such elected calendar year shall have commenced. (c) The pre-selected amount that an officer may elect to defer shall be one or more of the following: (i) a fixed dollar amount or percentage of the officer's bi-weekly base salary; (ii) a fixed dollar amount or percentage of the officer's quarterly pay; (iii) a fixed dollar amount or percentage of the officer's participation in the performance pay plan , if any. (d) Notwithstanding paragraphs (a),(b) and (c), where an officer first becomes eligible to participate in the Plan, the newly eligible officer may make the election under this Section 3 to defer the specified compensation for services to be performed subsequent to the election and for the remainder of the calendar 1 2 year in which the election under this Section 3 is made provided such election is made within 30 days after the date the officer first becomes eligible. (e) Within such periods of time as the Committee shall designate, and in addition to the provisions of paragraphs (a) through (d), an officer may elect to defer that portion or all of the officer's cash and/or stock compensation (i) described in paragraph (c), (ii) the performance share program, and/or (iii) any other plan or program that provides for cash or stock compensation, to the extent that such amounts would otherwise be nondeductible by the Company pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended. For purposes of the preceding sentence, the amount to be deferred with respect to any compensation plans payable in Company shares shall be determined by taking into consideration any fixed cash compensation (including biweekly and quarterly pay) to be received subsequent to the date on which shares are distributable under such program. Notwithstanding any other provision of this Plan, deferrals under this paragraph (e) shall be distributable only upon termination of employment in accordance with Section 6. (f) All elections under this Plan shall be made by written notice delivered to the Vice President, Human Resources, of the Company specifying (i) the number of calendar years, one or more, during which the election shall apply, (ii) the portion, if any, determined under paragraph (c), of each category of the Participant's compensation to be deferred for such year or years, as described above, (iii) the time of distribution, and (iv) if, applicable, the payment option as provided in Section 6 for distributions upon termination of employment. (g) A Participant may designate that the deferral election under this Section 3 shall remain in effect until the Participant, on a prospective basis, withdraws the election or changes the amount to be deferred. Any notice of the withdrawal of the deferral election or change of amount to be deferred shall be effective on the first day of the calendar year following the date on which such notice is given to the Company's Vice President, Human Resources; provided that, such notice shall not change, alter or terminate the deferral of the officer's participation in the performance pay plan for the year in which such notice of withdrawal is given which, except for the deferral, would be payable in the calendar year following the date on which such notice of withdrawal is given. (h) Notwithstanding paragraph (f) and the first sentence of paragraph (g), any compensation earned after the end of the first month in which a Participant under this Plan no longer is an officer of the Company, as defined in Section 1, but continues to be employed by the Company, shall not be deferred, provided however, the balance in the Participant's Deferral Accounts shall continue to be held and administered pursuant to the Plan. 2 3 4. DEFERRAL OF CASH COMPENSATION. (a) On the date the cash compensation deferred under the Plan would have become payable to the Participant in the absence of an election under the Plan to defer payment thereof, the amount of such deferred compensation shall be credited to a Stock Deferral Account and/or any of the Cash Deferral Account investment portfolios designated as available by the Committee from time to time. All Deferral Accounts shall be established and maintained for each Participant in the Company's accounting books and records and the Company shall be under no obligation to purchase any investments designated by the Participant. To the extent that, at the time amounts are credited to a Participant's Deferral Accounts, any federal, state or local payroll withholding tax applies (e.g., Medicare withholding tax), the Participant shall be responsible for the payment of such amount to the Company and the Company shall promptly remit such amount to the proper taxing authority. (b) Participant's Cash Deferral Accounts shall be credited with any gains or losses equal to those generated as if the Participant's Cash Deferral Account balances had been invested in the applicable investment portfolio(s) selected by the Participant (c) A Participant's deferred cash compensation credited to a Participant's Stock Deferral Account shall be used to determine the number of full and fractional units ("Units") representing Company Common Shares ("Shares") which the deferred amount would purchase at the closing price for the Shares on the New York Stock Exchange ("NYSE") composite transactions reporting system on the date that the deferred amount is credited pursuant to paragraph (a) and if Shares were not traded on that date on the NYSE, then such computation shall be made as of the first preceding day on which Shares were so traded. The Company shall credit the Participant's Stock Deferral Account with the number of full and fractional Units so determined. A Participant's Stock Deferral Account shall be administered in accordance with Section 5(b) through (e). (d) A Participant may elect pursuant to rules established by the Committee to transfer a portion or all of the balance of any Deferral Account established under this Section 4 to any other such Deferral Account. (e) Notwithstanding the foregoing, a Participant may elect to have any portion or all of the Participant's cash deferrals credited to any of the Deferral Accounts listed in paragraph (a) and may transfer balances in accordance with paragraph (d) provided that the Participant is considered, in the judgement of the Chief Executive Officer of the Company, to be on plan to meet the Participant's Company Share ownership guideline. Otherwise, a Participant must elect that at least 50% of any cash deferral hereunder be credited to a Stock Deferral Account and may not transfer any portion of the balance of the Stock Deferral Account to another Deferral Account. 3 4 5. DEFERRAL OF STOCK COMPENSATION. (a) At the time that Shares are distributable to a Participant, who has elected to defer the receipt thereof under Section 3(e), in lieu of Shares being issued, there shall be credited to a separate Stock Deferral Account for the Participant, full stock equivalent units ("Units') which shall be established and maintained on the Company's records. One Unit shall be allocated to the Stock Deferral Account for each such Share. The balance of a Stock Deferral Account established under this Section 5(a) may not be transferred to any other Deferral Account. (b) As of each dividend payment date established by the Company for the payment of cash dividends with respect to its Shares, the Company shall credit each separate Stock Deferral Account of a Participant with an additional number of whole and/or fractional Units equal to: (i) the product of (x) the dividend per Share which is payable with respect to such dividend payment date, multiplied by (y) the number of whole and fractional Units credited to the separate Stock Deferral Account of a Participant as of such payment date; divided by ---------- (ii) The closing price of a Share on the dividend payment date (or if Shares were not traded on that date, on the next preceding day on which Shares were so traded), as reported on the NYSE-composite tape. (c) At no time prior to actual delivery of Shares pursuant to the Plan, shall the Company be obligated to purchase or reserve Shares for delivery of a Participant and the Participant shall not be a shareholder nor have any of the rights of a shareholder with respect to the Units credited to the Participant's Stock Deferral Accounts. (d) To the extent that, at the time Units are credited to a Stock Deferral Account of a Participant, any federal, state or local payroll withholding tax applies (e.g., Medicare withholding tax), the Participant shall be responsible for the payment of such amount to the Company and the Company shall promptly remit such amount to the proper taxing authority. (e) In the event of any change in the number of outstanding Shares by reason of any stock dividend, stock split up, recapitalization, merger, consolidation, exchange of shares or other similar corporate change, the number of Units in each separate Stock Deferral Account of a Participant shall be appropriately adjusted to take into account any such event. 6. PAYMENT OF DEFERRED COMPENSATION UPON TERMINATION. 4 5 (a) The total amount standing as a credit in a Participant's Cash Deferral Accounts shall, upon termination of employment, be payable to the Participant either in a lump sum or in periodic installments over such period, not exceeding ten years, as the Participant shall have selected pursuant to Section 3(f)(iv). Such periodic payments shall begin or the lump sum payment shall be made, as the case may be, from the Participant's Cash Deferral Accounts, at such time, not more than twelve (12) months after the Participant ceases to be an employee of the Company, as the Participant shall have selected pursuant to Section 3 (f)(iv). All amounts payable in accordance with this Section 6(a) shall be subject to applicable federal, state and/or local payroll withholding taxes then in effect. Notwithstanding the foregoing, a Participant may elect no later than thirty (30) days prior to the Participant's termination of employment, nor earlier than ninety (90) days prior thereto, to change the form of distribution of the Participant's Cash Deferral Accounts. (b) The amount of each installment payable to a Participant shall be determined by dividing the aggregate balance of such Participant's Cash Deferral Accounts by the number of periodic installments (including the current installment) remaining to be paid. Until a Participant's Cash Deferral Accounts has been completely distributed, the balance thereof remaining, from time to time, shall be credited with gains and losses on a monthly basis as provided in Section 4(b). (c) The total number of Units credited to the Participant's Stock Deferral Accounts shall upon termination of employment be payable to the Participant either in a lump sum or in periodic installments, over such period, not exceeding ten years, as the Participant shall have selected pursuant to Section 3(f)(iv). Such periodic payments shall begin or the lump sum payment shall be made, as the case may be, at such time, not more than twelve (12) months after the Participant ceased to be an employee of the Company, as the Participant shall have selected pursuant to Section 3(f)(iv). All amounts payable in accordance with this Section 6(c) shall be subject to applicable federal, state and/or local payroll withholding taxes then in effect. Notwithstanding the foregoing, a Participant may elect no later than thirty (30) days prior to the Participant's termination of employment, no earlier than ninety (90) days prior thereto, to change the form of distribution of the Participant's Stock Deferral Accounts. (d) The amount of any installment payable from the Stock Deferral Accounts to a Participant shall be determined by dividing the balance of the aggregate number of Units in the Participant's Stock Deferral Accounts by the number of periodic installments (including the current installment) remaining to be paid and the quotient shall be the number of Shares that are payable. If the determination of the installment payable from the Participant's Stock Deferral Accounts results in a fractional Share being payable, the installment payment shall exclude any such fractional Share payment except that, in the final installment payment, any such fractional Share shall be paid in cash in an amount as determined by the Committee. Until the Participant's Stock Deferral 5 6 Accounts have been completely distributed, the balance in the Stock Deferral Accounts shall continue to be credited with the dividend equivalents on such balances as provided in Section 5(b). (e) If the Participant elects to satisfy tax withholding under paragraph (c) with Shares, then such withholding shall be from those Shares otherwise issuable pursuant to paragraph (c) above, and shall be such number of Shares that will provide for the federal, state and/or local income tax at the rates then applicable for supplemental wages, unless otherwise requested by the Participant, but in no event less than the statutory minimums for tax withholding. (f) For purposes under paragraph (e) of determining the number of Shares that are to be withheld to provide for the tax withholding, Shares shall be valued at the closing price on the New York Stock Exchange of a Share on the date the Shares are distributable (or if the Shares were not traded on that date, on the next preceding day on which the Shares were so traded). If the determination of the tax withholding would require the withholding of a fractional Share, the Participant shall remit cash to the Company in lieu of such fractional Share. (g) In the event a Participant dies prior to receiving payment of the entire amount in that Participant's Cash Deferral Accounts and/or Stock Deferral Accounts, as the case may be, the unpaid balance shall be paid to such beneficiary as the Participant may have designated in writing to the Vice President, Human Resources, of the Company as the beneficiary to receive any such post-death distribution under the Plan or, in the absence of such written designation, to the Participant's legal representative or to the beneficiary designated in the Participant's last will as the one to receive such distributions. Distributions subsequent to the death of a Participant may be made either in a lump sum or in periodic installments in such amounts and over such period, not exceeding ten years from the date of death, as the Committee may direct and the amount of each installment shall be computed as provided in Section 6(b), and (d) as the case may be. (h) Payments from the Cash Deferral Accounts shall be made in cash and payments from the Stock Deferral Accounts shall be made in Shares. The amount of any distribution pursuant to Sections 6 through 9 shall reduce the balance held in the Participant's corresponding Deferral Accounts as of the date of such distribution. Installment payments shall be made pro-rata from a Participant's Deferral Accounts. 7. IN-SERVICE DISTRIBUTIONS. Pursuant to Section 3 and other than for deferrals pursuant to Section 3(e), a Participant may elect to receive an in-service distribution of all or any specified percentage of the Participant's deferral for any calendar year commencing not earlier than the first year following the year that such compensation would have been payable. In-service distributions shall be made in a lump sum payment. A Participant may elect once for any calendar year of deferral for which the Participant has elected an in-service distribution, to change the date of distribution to another in-service year or upon termination; 6 7 provided, however, that any such modification must be made in writing at least twelve (12) months prior to the date originally elected for the in-service distribution. Notwithstanding the foregoing, any distribution hereunder shall be subject to further deferral pursuant to an election under Section 3(e). 8. SPECIAL DISTRIBUTIONS. Notwithstanding any other provision of this Plan, a Participant may elect to receive distribution of part or all of the total of Participant's eligible Deferral Accounts, other than from deferrals pursuant to Section 3(e), in one or more distributions if (and only if) the amount of the distribution is reduced by ten (10) percent. The ten (10) percent reduction shall be forfeited. Distributions shall be made pro-rata among Participant's eligible Deferral Accounts. Any distribution made pursuant to such an election shall be made within sixty (60) days of the date such election is submitted to Vice President - Human Resources. Notwithstanding the foregoing, any distribution hereunder shall be limited to an amount that would not be subject to further deferral pursuant to an election under Section 3(e). 9. HARDSHIP DISTRIBUTIONS. The Committee may accelerate the distribution of part or all, in any or all, of a Participant's Deferral Accounts for reasons of severe financial hardship. For purposes of the Plan, severe financial hardship shall be deemed to exist in the event the Committee determines that a Participant needs a distribution to meet immediate and heavy financial needs resulting from a sudden or unexpected illness or accident of the Participant or a member of the Participant's family, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstance arising as a result of events beyond the control of the Participant. A distribution based on financial hardship shall not exceed the amount required to meet the immediate financial need created by the hardship. 10. NON-ASSIGNABILITY. None of the rights or interests in any of the Participant's Deferral Accounts shall, at any time prior to actual payment or distribution pursuant to the Plan, be assignable or transferable in whole or in part, either voluntarily or by operation of law or otherwise, and such rights and interest shall not be subject to payment of debts by execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner; provided that, upon the occurrence of any such assignment or transfer or the attempted assignment or transfer, all payments hereunder shall be payable in the sole and unrestricted judgment and discretion of the Committee, as to time and amount (including a lump sum amount), and shall be distributable to the person who would have received the payment but for this Section 10 only at such time or times and in such amounts as the Committee, from time to time, and in its sole and unrestricted judgment and discretion, shall determine. Should an event covered by this Section 10 occur prior to the death of a Participant, the balance, if any, in the Participant's accounts shall, after such death, be thereafter distributed as provided in Section 6 subject to the provisions of this Section 10. 11. INTEREST OF PARTICIPANT. The Company shall be under no obligation to segregate or reserve any funds or other assets for purposes relating to the Plan and, except as set forth in this Plan, no Participant shall have any rights 7 8 whatsoever in or with respect to any funds or other assets held by the Company for purposes of the Plan or otherwise. Each Participant's accounts maintained for purposes of the Plan merely constitute bookkeeping entries on records of the Company, constitute the unsecured promise and obligation of the Company to make payments as provided herein, and shall not constitute any allocation whatsoever of any cash, shares or other assets of the Company or be deemed to create any trust or special deposit with respect to any of the Company's assets. Notwithstanding the foregoing provisions, nothing in this Plan shall preclude the Company from setting aside Shares or funds in trust pursuant to one or more trust agreements between a trustee and the Company. However, no Participant shall have any secured interest or claim in any assets or property of the Company or any such trust and all Shares or funds contained in such trust shall remain subject to the claims of the Company's general creditors. 12. AMENDMENT. The Board of Directors of the Company, or the Organization and Compensation Committee may, from time to time, amend or terminate the Plan, provided that no such amendment or termination of the Plan shall adversely affect a Participant's accounts as they existed immediately before such amendment or termination or the manner of distribution thereof, unless such Participant shall have consented thereto in writing. Notice of any amendment or termination of the Plan shall be given promptly to all Participants. 13. PLAN IMPLEMENTATION. This Plan is adopted and effective on the 25th day of July, 1994, as amended on June 17, 1995, as further amended September 25, 1995, effective as of January 1, 1995, further amended on September 22, 1997 and further amended on September 27, 1999, effective as of January 1, 2000; provided, however that any deferrals made hereunder into a Stock Deferral Account prior to January 1, 2000, shall be governed by the provisions of the Plan in effect prior to January 1, 2000, further amended on February 28, 2000, effective as of January 1, 2000 and March 11, 2000. 8 EX-10.L 6 EXHIBIT 10(L) 1 Exhibit (10)(l) THE LUBRIZOL CORPORATION EXECUTIVE COUNCIL DEFERRED COMPENSATION PLAN As Amended 1. PURPOSE. The purpose of this Executive Council Deferred Compensation Plan (the "Plan") is to permit a member of the Executive Council (sometimes hereinafter referred to as the "Member" or as the "Participant") who is employed by The Lubrizol Corporation (the "Company"), to defer a portion of such Member's compensation as provided in this Plan. 2. ADMINISTRATION. The Plan shall be administered by the Organization and Compensation Committee of the Board of Directors of the Company (the "Committee"). The Committee's interpretation and construction of all provisions of the Plan shall be binding and conclusive upon all Participants and their heirs and/or successors. 3. RIGHT TO DEFER COMPENSATION. (a) A Member may, at any time prior to January 1 of a given calendar year, elect, for one or more future successive calendar years commencing with the calendar year immediately following the election (each a "Participation Year"), to defer under the Plan a pre-selected fixed dollar amount or percentage of such Member's variable compensation, if any (the "deferred compensation"), under The Lubrizol Corporation Performance Pay Plan ("Performance Pay Plan"), which such Participant may thereafter be entitled to receive for services performed during each elected Participation Year. (b) The election under this Section 3 shall take effect on the first day of the first elected Participation Year and such election shall be irrevocable for any elected Participation Year once such Participation Year shall have commenced. (c) Notwithstanding paragraphs (a) and (b), when an individual Member first becomes eligible to participate in the Plan, the newly eligible Member may make the election under this Section 3 to defer the specified compensation for services to be performed subsequent to the date specified in the election and for the remainder of the calendar year in which the election under this Section 3 is made, provided that such election is made within 30 days after the date that the Member is notified of the Member's eligibility. (d) All elections under this Plan shall be made by written notice (on a form provided by the Company) specifying (i) the number of calendar years, one or more, during which the election shall apply, and (ii) the deferred compensation, if any, determined under paragraph (a). (e) A Participant may designate that the election under this Section 3 shall remain in effect until the Participant, on a prospective basis, withdraws the election or changes the amount to be deferred. Any notice of the withdrawal or change in the amount of the election shall be effective on the first day of the calendar year next following the year on which such notice is given; provided that, such notice shall not change, alter or terminate the deferral of the Member's participation in the Performance 1 2 Pay Plan for the year in which such notice of withdrawal or change is given which, except for the deferral, would be payable in the calendar year next following the year in which such notice of withdrawal or change is given. Notwithstanding paragraph (b) and the first sentence of this paragraph (e), any variable compensation earned after the end of the first month in which a Participant under this Plan ceases to be a Member, as defined in Section 1, but continues to be employed by the Company, shall not be deferred, provided however, the balance in the Participant's Stock Deferral Accounts shall continue to be held and administered pursuant to the Plan. (f) All notices by a Participant under the Plan shall be in writing and shall be given to the Company's Vice President, Human Resources. 4. STOCK DEFERRAL ACCOUNTS. (a) At the close of business of the day on which the Performance Pay Plan deferred compensation would have been payable to the Participant in the absence of the election under the Plan to defer payment thereof, there shall be credited to a separate Stock Deferral Account for each Participant full and fractional stock equivalent units ("Units") which shall be established as hereinafter provided and shall be maintained for each Participant on the Company's records. (b) The number of full and fractional Units that shall be credited to a separate Stock Deferral Account for a Participant shall be equal to an amount determined by: (i) Dividing the Participant's deferred compensation for the applicable Participation Year by the average of the closing price for Lubrizol Common Shares ("Shares") on the New York Stock Exchange ("NYSE") composite transactions reporting system ("composite tape") for each of the ten (10) consecutive trading days commencing on the fourth business day following the release of earnings for such Participation Year; and (ii) multiplying the quotient determined in subparagraph (i) by 1.25. (c) To the extent that, at the time Units are credited to a Stock Deferral Account of a Participant, any federal, state or local payroll withholding tax applies (e.g., Medicare withholding tax), the Participant shall be responsible for the payment of such amount to the Company and the Company shall promptly remit such amount to the proper taxing authority. (d) The amount of deferred compensation used in the formula set forth in paragraph (b) shall not constitute a sum due and owing to Participant. Such amount shall be used solely as part of the formula to determine the number of full and fractional Units. (e) As of each dividend payment date established by the Company for the payment of cash dividends with respect to its Shares, the Company shall credit each separate Stock Deferral Account of a Participant with an additional number of whole and/or fractional Units equal to: 2 3 (i) the product of (x) the dividend per Share which is payable with respect to such dividend payment date, multiplied by (y) the number of whole and fractional Units credited to the separate Stock Deferral Account of the Participant as of such payment date; divided by ---------- (ii) the closing price of a Share on the dividend payment date (or if Shares were not traded on that date, on the next preceding day on which Shares were so traded), as reported on the NYSE- composite tape. (f) At no time prior to actual delivery of Shares pursuant to the Plan shall the Company be obligated to purchase or reserve Shares for delivery to any Participant and a Participant shall not be a shareholder or have any of the rights of a shareholder with respect to the Units credited to each separate Stock Deferral Account of a Participant. 5. PAYMENT OF DEFERRED COMPENSATION. (a) All Units credited to a separate Stock Deferral Account of Participant, including dividend equivalents thereon, shall be payable to the Participant at the end of three years from the first date Units were credited to such separate Stock Deferral Account of the Participant under Section 4(a); provided, however, that a Participant may elect once for any calendar year of deferral, to change the date of distribution to another in-service year or upon retirement; provided further, that any such modification must be made in writing at least twelve (12) months prior to the original date of distribution; provided further, that if a Participant's employment is terminated for any reason other than retirement or death, the Units credited to each separate Stock Deferral Account of a Participant as of the Participant's termination of employment date, including all dividend equivalents thereon, shall be payable to the Participant within 30 days of such termination of employment. (b) All distributions or payments of Units to a Participant shall be made in Shares equal to the number of whole Units credited to the separate Stock Deferral Account(s) of the Participant which become payable in accordance with Section 5(a). Any fractional number of Units shall be paid in cash in lieu of Shares. (c) To the extent that, at the time Shares are distributed to a Participant, any federal, state or local payroll withholding tax applies, the Participant shall be responsible for the payment of such amount to the Company and the Company shall promptly remit such amount to the proper taxing authority. Such payment may be made in cash, in Shares, or in any combination of cash and Shares, at the election of the Participant. All elections must be made in writing and be submitted to the Vice President - Human Resources. If the Participant elects to satisfy tax withholding with Shares, then such withholding shall be from those Shares otherwise issuable pursuant to paragraph (b) above, and shall be such number of Shares that will provide for the federal, state and/or local income tax at the rates then applicable for supplemental wages, unless otherwise requested by the Participant, but in no event less than the statutory minimums for tax withholding. If no election is made prior to the first distribution of Shares, the Company 3 4 shall withhold a sufficient number of Shares to pay the withholding taxes at the highest marginal tax rate in effect for such Participant. In no event shall the withholding be less than the statutory minimum for tax withholding. (d) In the event a Participant dies prior to receiving payment of the entire amount in each separate Stock Deferral Account of the Participant, the unpaid balance shall be paid to such beneficiary as the Participant may have designated in writing to the Vice President, Human Resources, of the Company as the beneficiary to receive any such post-death distribution under the Plan or, in the absence of such written designation, to the Participant's legal representative or to the beneficiary designated in the Participant's last will as the one to receive such distributions. Distributions subsequent to the death of a Participant may be made either in accordance with Section 5(a) and (b) or earlier, as determined by the Committee. (e) To the extent the Committee deems necessary, the Shares distributed to a Participant pursuant to Section 5(a) and (b) or 6(a) or to a successor pursuant to Section 5(d) may contain such restrictions on the right of immediate transfer as the Committee may reasonably determine. 6. ACCELERATION OF PAYMENTS. (a) The Committee may accelerate the distribution of part or all of one or more of a Participant's separate Stock Deferral Accounts for reasons of severe financial hardship. For purposes of the Plan, severe financial hardship shall be deemed to exist in the event the Committee determines that a Participant needs a distribution to meet immediate and heavy financial needs resulting from a sudden or unexpected illness or accident of the Participant or a member of the Participant's family, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstance arising as a result of events beyond the control of the Participant. A distribution based on financial hardship shall not exceed the amount required to meet the immediate financial need created by the hardship. 7. NON-ASSIGNABILITY. None of the rights or interests in any of the Participant's separate Stock Deferral Accounts shall, at any time prior to actual payment or distribution pursuant to the Plan, be assignable or transferable in whole or in part, either voluntarily or by operation of law or otherwise, and such rights and interest shall not be subject to payment of debts by execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner; provided that, upon the occurrence of any such assignment or transfer or the attempted assignment or transfer, all payments under Section 5 shall be payable in the sole and unrestricted judgment and discretion of the Committee, as to time and amount, and shall be distributable to the person who would have received the payment but for this Section 7 only at such time or times and in such amounts as the Committee, from time to time, and in its sole and unrestricted judgment and discretion, shall determine. Should an event covered by this Section 7 occur prior to the death of a Participant, the balance, if any, in each of the Participant's Stock Deferral Accounts shall, after such death, be thereafter distributed as provided in Section 5(d) subject to the provisions of this Section 7. 8. INTEREST OF PARTICIPANT. The Company shall be under no obligation to segregate or reserve any funds or other assets for purposes relating to the Plan and, except as set 4 5 forth in this Plan, no Participant shall have any rights whatsoever in or with respect to any funds or other assets held by the Company for purposes of the Plan or otherwise. Each Participant's separate Stock Deferral Accounts maintained for purposes of the Plan merely constitutes a bookkeeping entry on records of the Company, constitutes the unsecured promise and obligation of the Company to make payments as provided herein, and shall not constitute any allocation whatsoever of any cash or other assets of the Company or be deemed to create any trust or special deposit with respect to any of the Company's assets. Notwithstanding the foregoing provisions, nothing in this Plan shall preclude the Company from setting aside Shares or funds in trust pursuant to one or more trust agreements between a trustee and the Company. However, no Participant shall have any secured interest or claim in any assets or property of the Company or any such trust and all Shares or funds contained in such trust shall remain subject to the claims of the Company's general creditors. 9. MISCELLANEOUS. In the event of any change in the number of outstanding Shares by reason of any stock dividend, stock split up, recapitalization, merger, consolidation, exchange of shares or other similar corporate change, the number of Units credited to each separate Stock Deferral Account of a Participant shall be appropriately adjusted to take into account any such event. 10. AMENDMENT. The Board of Directors of the Company, or the Organization and Compensation Committee, may, from time to time, amend or terminate the Plan, provided that no such amendment or termination of the Plan shall adversely affect any Stock Deferral Account of a Participant as it existed immediately before such amendment or termination or the manner of distribution thereof, unless such Participant shall have consented thereto in writing. Notice of any amendment or termination of the Plan shall be given promptly to all Participants. 11. PLAN IMPLEMENTATION. This Plan is adopted and effective as of the 1st day of January, 1997, and amended effective November 23, 1998, and amended effective September 27, 1999, amended effective February 29, 2000 and March 11, 2000. 5 EX-27 7 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENTS OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000060751 THE LUBRIZOL CORPORATION 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 126,571 0 299,191 4,140 270,323 750,328 1,595,465 935,387 1,672,780 300,969 364,772 0 0 79,221 715,207 1,672,780 435,034 436,161 307,708 307,708 0 (10) 7,229 43,885 13,780 0 0 0 0 30,105 0.55 0.55
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